Swedish pensions and insurance group Folksam announced it is investing SEK2.5bn (€222m) in a climate adaptation bond issued by the City of Stockholm.

The capital city’s council is planning to use the proceeds of the bond for its integrated environmental programme and climate action plan, with half of the money to be spent on investments in the city’s water infrastructure, according to Folksam.

Marcus Blomberg, Folksam’s chief investment officer, said: “Last year’s downpours and floods showed the need for investments in water infrastructure, for example sewage plants around Sweden.

“The City of Stockholm runs proactive climate adaptation work and planned investments are a continuation of important climate adaptation projects that are already underway,” he said.

Blomberg said it was gratifying that the Folksam group could help support a municipality that was both restructuring and strengthening its resistance to climate change.

Giving details of how the overall investment would be distributed between its subsidiaries, Folksam said the municipal pensions unit KPA Pension would take SEK1.01bn, Folksam Life would invest SEK570m and its occupational pensions unit Folksam Tjänstepension would be allocated SEK420m.

The general insurance division Folksam Sak will invest a further SEK354m of the bond, and the pension foundation Konsumentkooperationens Pensionsstiftelse will take SEK144m of the bond, the company said.

Camilla Larsson, KPA Pension’s chief executive officer, said that with its long-term perspective, pension capital was well suited for this type of investment.

“Municipal bonds are a good example of how we create returns for KPA Pension’s customers and at the same time contribute to sustainable social development,” she said.

Citing a report from the organisation Svenskt Vatten (Swedish Water), Folksam said water infrastructure in Sweden needed large investment volumes, requiring just under SEK600bn or around 10% of Sweden’s GDP between now and 2040.

Read the digital edition of IPE’s latest magazine